Suppose that a stock sells at a price of $40 on the expiration date. Compute the payoff to the seller of a call option if the option strike price is $20.
A) -$20
B) -$30
C) -$40
D) -$50

Question

Quizplus · Accepted Answer

A) The payoff to the seller is negative of the payoff to holder of call option. So, payoff or loss to seller of a call option is -(stock price - strike price) = -($40 - $20) = -$20.

Suppose That a Stock Sells at a Price of $40